Highcroft Investments PLC
Report & Financial Statements
31 December 2009
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Contents
Chairman’s introduction
Corporate governance
Report of the directors
Directors’ remuneration report
Consolidated statement of
comprehensive income
Consolidated statement of
financial position
Consolidated statement of
changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Five year summary
Report of the independent auditor
Company balance sheet
Notes to the company’s
financial statements
Directors and advisers
01
02
06
14
16
17
18
19
20
32
33
35
36
IBC
Front cover
Top left: Retail unit in Leamington Spa, let to
Thorntons
Top right: Radio station and office building in
Oxford, let to the BBC
Bottom left: Distribution centre in Kidlington,
Oxfordshire, let to Parcelforce
Bottom right: Multi-let retail units in Staines, with
offices above
Pictured above
Top left: Office building in central Bristol, let to
Royal & Sun Alliance
Top centre: Distribution centre in Southampton,
let to Metabo
Top right: Multi-let office building in London, SW1
Bottom left: Retail unit in Oxford, let to Jigsaw
Bottom centre: Multi-let retail units in Cirencester,
with residential above
Bottom right: Retail unit in Norwich, let to Austin
Reed
The report of the directors on pages 6 to 13 and the directors’ remuneration report on pages 14 and 15
have each been drawn up in accordance with the requirements of English law and liability in respect
thereof is also governed by English law. In particular, the responsibility of the directors for these reports
is owed solely to Highcroft Investments PLC.
The directors submit to the members their report and accounts of the group for the year ended
31 December 2009. Pages 1 to 15, including the chairman’s introduction, corporate governance
statement, report of the directors and directors’ remuneration report, form part of the report of the
directors.
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01
Chairman’s introduction
Key Highlights
Gross property income down 8.5% to £1,943,000
Profit for the year on revenue activities down 13.1% to £1,670,000
Basic earnings per share on all activities was 76.2p
Adjusted earnings per share (on revenue activities) was 32.3p
Net asset value per share up 8.8% to 666p
Total property income distribution 26.0p per share
Dear shareholder
Turning to the revenue position, property income was down 8.5%
reflecting the voids in the commercial sector and also the sale of a
To use a somewhat overworked footballing analogy, 2009 was
residential property. Equity income was down more noticeably – a
very much a year of two halves. Shareholders will recall that at the
fall of 35% – which reflects the general cuts in dividends by UK
interim stage we reported further falls in the value of our property
companies, exacerbated by our bank holdings and the net sales we
portfolio, pressure on revenue streams and a net asset decline to
had carried out.
591p. I wrote in the Interim Statement that an element of stability
– and perhaps even optimism – was emerging in some quarters but
If the above reveals at best a fairly patchy year, shareholders are
that we were continuing to take a cautious view.
seeing the benefits of REIT status at the post tax and dividend level.
The full year of REIT status has meant that we have been able to
In the event, both property and equity markets saw recovery,
increase the property income distribution by just over 40% to a full
though optimism is still somewhat fragile. Net asset value – as a
year total of 26p per share.
result of these recoveries and our retained earnings – was 666p
per share, up 8.8% from the previous year. While we are pleased
Turning to prospects for the current year and beyond, the experts
to see an upturn in asset value, your board is mindful that this is a
and commentators have mixed views as to the recovery. It is
level we first achieved in 2004 while the decline from the peak in
evident that certain asset classes have recovered sharply with
2006 is nearly 20%.
talk of “bubbles”; on the other hand thoughts of “double dip”
recession, the effect of debt-reduction measures and the overhang
In terms of capital values, while we had not experienced some
of distressed property portfolios makes for caution.
of the more precipitous declines seen elsewhere in the property
market, we appear to have matched the recovery. Again I feel it is
We look forward to meeting shareholders at our AGM on 11 May –
worth stressing that this generally says something about the quality
do note the change of venue.
and defensive nature of many of our assets. Notable highlights
included new leases at Warrington and Kingston. Equity markets
saw a strong bounce from the March lows enabling us to take the
opportunity, in the second half of the year, to trim some of our
holdings. In part this was to ensure that we kept well within the
rules imposed by virtue of being a REIT – i.e. that non-property
assets should represent no more than 25% of total assets.
John Hewitt
Chairman
9 March 2010
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02
Highcroft Investments PLC Report & Financial Statements 31 December 2009
Corporate governance
Application of principles
The company has applied the principles of good governance contained in the Combined Code 08 (Principles of Good Governance and
Code of Best Practice) except as noted in the Compliance Statement below.
Compliance
The company has complied throughout the year with the Code provisions set out in Section 1 of the Combined Code 08 except that no
performance related payments were made to directors, which is not in accordance with Code provision B.1.1. The remuneration committee
and board believe that the directors do not need to have performance related payments in order to be motivated to give their best in serving
the interests of shareholders.
Board effectiveness
The board is responsible for leading and controlling the group activities and, in particular:
approving group objectives, strategy and policies
business planning
review of performance
risk assessment
dividends
appointments
The board meets at least six times a year and has a schedule of matters specifically reserved for its decision. Executive directors are
responsible for the implementation of strategy and policies and the day-to-day decision making and administration.
During 2009 the number of board and committee meetings and individual participation was as follows:
Number of Meetings
J Hewitt
R N Stansfield
C J Clark
J C Kingerlee
D Bowman
D H Kingerlee
Board
Audit
Remuneration
Nomination
6
6/6
6/6
6/6
6/6
6/6
6/6
3
3/3
2/3
3/3
1
1/1
1/1
1/1
0
0
0
0
Not applicable
3/3 (part)
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
The board receives appropriate and timely information and the directors are free to seek any further information they consider necessary. All
directors have access to advice from the company secretary and independent professionals at the company’s expense. Appropriate training
is available for new directors and other directors as necessary.
The board has six directors of which three are executive directors and three are non-executive directors. The chairman is John Hewitt, the senior
independent director is Richard Stansfield and the chief executive is Jonathan Kingerlee. The board members’ biographies are on page 6.
The independent non-executive directors bring additional experience and knowledge and are independent of management and any
business or other relationship that could interfere with the exercise of their independent judgement. This provides a balance whereby an
individual or small group cannot dominate the board’s decision-making.
All directors are subject to re-election every three years and, on appointment, at the first AGM after appointment. The board has established a
separate nomination committee, comprising the non-executive directors responsible for making recommendations for appointments to the board.
Formal procedures appropriate to the size of the business are in use for performance evaluation of the board and its committees. They
include objective-setting and review with the use of an external facilitator.
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03
Directors’ remuneration
The directors’ remuneration report is on page 14 and 15. It sets out the company’s policy and the full details of all elements of the
remuneration package of each individual director.
Relations with shareholders
The board values the views of its shareholders and recognises their interest in the company’s strategy and performance, board membership
and quality of management. The AGM is used to communicate with investors and documents are sent to shareholders at least 20 working
days before the meeting. The chairman and chairmen of the audit and remuneration committees are available to answer relevant questions.
Separate resolutions are proposed on each substantial issue so that they can be given proper consideration and there is a resolution to
receive and consider the annual report and financial statements. The company counts all proxy votes and will indicate the level of proxies
lodged on each resolution, after it has been dealt with by a show of hands. We have no institutional shareholders.
Accountability and audit
The board presents a balanced and understandable assessment of the company’s position and prospects in all interim and other price-
sensitive public reports, reports to regulators and information required to be presented by statute. The responsibilities of the directors as
regards the financial statements are described on page 5, and that of the auditor on pages 33 and 34. A statement on going concern appears
on page 4.
The audit committee of the board comprises all the non-executive directors and is chaired by Christopher Clark. The committee meets
not less than three times a year to review the scope and findings of the auditor’s work on audit and non-audit issues, the interim and
annual reports prior to their publication, the application of the company’s accounting policies and any changes to the financial reporting
requirements. The audit committee also plays an important part in reviewing the company’s systems of internal control which are described
below. The audit committee reports on each of its meetings at the next board meeting.
The audit committee reviews the terms of engagement with the external auditor and ensures that the external auditor is independent via the
segregation of audit-related work from other accounting functions and has referenced fees with similar auditors.
Internal control
The board is responsible for establishing and maintaining a sound system of internal control and for reviewing its effectiveness. The system
of internal control is designed to meet the particular needs of the group and the risks to which it is exposed and by its very nature provide
reasonable, but not absolute, assurance against material misstatement or loss. The internal control system was in place for the period under
review up to the date of approving the accounts. There is an ongoing process to identify, evaluate and manage the risks facing the business.
The entire system of internal control was reviewed during the year. This review has been undertaken in accordance with guidance published
by The Institute of Chartered Accountants in England and Wales.
The key procedures, which exist to provide effective internal control, are as follows:
clear limits of authority
annual revenue, cash flow and capital forecasts, reviewed regularly during the year, monthly monitoring of cash flow and capital
expenditure reported to the board, quarterly and half year revenue comparisons with forecasts
financial controls and procedures
clear guidelines for capital expenditure and disposals, including defined levels of authority
two-monthly meetings of the executive directors to authorise share purchases and sales
an audit committee, which approves audit plans and published financial information and reviews reports from the external auditor
arising from the audit and dealing with significant control matters raised
regular board meetings to monitor continuously any areas of concern
annual review of risks and internal controls
annual review of compliance with Combined Code.
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04
Highcroft Investments PLC Report & Financial Statements 31 December 2009
Corporate governance continued
The board has considered the need for an internal audit function but has decided that the size of the group does not justify it at present.
However, it does review the position annually.
The directors have reviewed the operation and effectiveness of the group’s system of internal control, including financial, operational and
compliance controls and risk management for the financial year ended 31 December 2009 and the period up to date of approval of the
financial statements.
Going concern
The directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable
future and consider that there are no material uncertainties that lead to significant doubt upon the group’s ability to continue as a going
concern. Cash flow forecasts are prepared annually as part of the planning and budgeting process and are monitored and reworked
monthly. For this reason, the directors continue to adopt the going concern basis in preparing the financial statements.
Given the continuing economic uncertainties, the directors are aware of the general concern affecting the assessment of the going concern
basis for all businesses and have therefore taken particular care in reviewing the going concern basis this year. The group has no borrowing.
The directors have not renewed either the company’s overdraft facility or its loan facility following the repayment of the medium term loan.
Contact is maintained with a number of banks which regard the group as an attractive lending opportunity. The company carefully monitors
its forecast cash balances in order to ensure an overdraft is not required and it has relatively liquid assets, in the form of equity investments,
which it can draw on if necessary.
Structure of share capital and rights and obligations attaching to shares
The company’s authorised ordinary share capital as at 31 December 2009 was 8,000,000 of which 5,167,240 shares of 25p each were
allotted, called up and fully paid.
Subject to the Companies Act for the time being in force (the Act) the company’s articles of association confer on holders the following
principal rights:
To receive a dividend
The profits of the company available for dividend and resolved to be distributed shall be applied in the payment of dividends to the
members and to persons becoming entitled to shares by transmission, in accordance with their respective rights and priorities. The
company in general meeting may declare dividends accordingly.
To a return of capital or assets if available on liquidation
Upon any winding up of the company, the liquidator may, with the sanction of an extraordinary resolution of the company and any other
sanction required by the statutes, divide among the members in specie the whole or any part of the assets of the company and may, for that
purpose, value any assets and determine how the division shall be carried out as between the members of different classes of members.
To receive notice of, attend and vote at an AGM
At each AGM upon a show of hands every member present in person shall have one vote, and upon a poll every member present in
person or by proxy shall have one vote for every share of which he or she is the holder.
To have rights in respect of share certificates and share transfers
Every person whose name is entered as a Member in the Register shall be entitled without payment to one certificate for all the shares of
each class held by him or, upon payment of such reasonable out-of-pocket expenses for every certificate after the first as the board shall
from time to time determine, several certificates each for one or more of his shares.
On any transfer of shares, the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in
the register in respect thereof.
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05
Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare
the group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs)
and the company financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice). The financial statements are required by law to give a true and fair view of the state of affairs of the group and parent
company and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently
make judgements and estimates that are reasonable and prudent
state whether applicable IFRSs and UK accounting standards have been followed, subject to any material departures disclosed and
explained in the financial statements
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in
business.
The directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial
position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the
IAS Regulation. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
In so far as each of the directors is aware:
there is no relevant audit information of which the company’s auditors are unaware; and
the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to
establish that the auditors are aware of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
To the best of my knowledge:
the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
the management report includes a fair review of the development and performance of the business and the position of the company and
the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that
they face.
By Order of the board
D Bowman
Company Secretary
9 March 2010
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06
Highcroft Investments PLC Report & Financial Statements 31 December 2009
Report of the directors
Principal activities
Highcroft Investments PLC is a group that invests in property and equity investments.
Directors
The directors are as follows:
John Hewitt:
John Hewitt, 64, worked in the City of London in stockbroking for over 20 years where he became managing director of Scrimgeour Vickers.
He now splits his time between advising local and international businesses and organisations, and charitable fund-raising in the medical
and academic world. He was appointed as an independent non-executive director in 1999.
Christopher Clark:
Christopher Clark, 67, was appointed as an independent non-executive director in January 2006. He is also the non-executive chairman of
Brookwell Limited and was previously a board member of Advance Focus Fund Limited and of William Ransom & Son plc. He previously
worked as a stockbroker and is a Fellow of the Chartered Institute of Secretaries.
Richard Stansfield:
Richard Stansfield, 52, is a chartered surveyor and formerly a director of Savills commercial department based in Oxford where he advised
a number of institutional clients on their commercial property portfolios throughout the UK. He is now Land Agent for Jesus College
Oxford and responsible for a fund of commercial, residential and rural properties located in England and Wales. He was appointed as an
independent non-executive director in 2002.
Jonathan Kingerlee:
Jonathan Kingerlee, 49, became an executive director in 1995 and chief executive in 2001. He is chief executive of the Kingerlee Group of
companies, which trades principally in construction and property development and has various investment interests. Other interests include
companies developing and selling environmental building materials, and he is also a founder member of the Good Homes Alliance which
is a trade association open to property developers committed to improving the performance of newly constructed homes.
David Bowman:
David Bowman, 54, became finance director in 2001, having been company secretary since 1993. He is also a consultant for Practical
Financial Management and a non-executive director of Traidcraft PLC and of Traidcraft Exchange Limited.
David Kingerlee:
David Kingerlee, 48, became an executive director in 1996. He is also an executive director and company secretary of the Kingerlee Group
of companies, which trades principally in construction and property development and has various investment interests.
John Hewitt and Jonathan Kingerlee retire by rotation and, being eligible, offer themselves for re-election.
John Hewitt is continuing in office having served more than ten years on the board. Before recommending John for re-election the other
directors have conducted a rigorous appraisal of performance, led by Richard Stansfield as senior independent director.
David Bowman has given notification that he will retire from the board when his current contract with the company expires on 30 June
2010. We have begun the process to identify a successor and will make an announcement when a decision has been made.
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07
Interests of the directors in the shares of the company
The beneficial and other interests of the directors, and their families, in the shares of the company at 1 January 2009 and at 31 December
2009 were as follows:
J Hewitt
C J Clark
R N Stansfield
J C Kingerlee
D Bowman
D H Kingerlee
31 December 2009
1 January 2009
Non-
Non-
Beneficial beneficial Beneficial beneficial
10,000
4,950
–
118,023
–
–
–
–
10,000
4,950
–
118,023
–
–
–
–
17,325
86,354
17,325
114,397
77,780
114,397
86,354
77,780
There is no duplication of directors’ shareholdings, except in respect of:
77,780 of the non-beneficial holdings of David Bowman and David Kingerlee
1,715 of the beneficial and non-beneficial holdings of David Bowman
25,927 of the beneficial and non-beneficial holdings of David Kingerlee
25,927 of the beneficial holding of Jonathan Kingerlee and 25,297 of the non-beneficial holdings of David Bowman and David Kingerlee.
There were no changes in the interests of the directors in the period from 1 January 2010 to 9 March 2010.
Substantial shareholders
As at 9 March 2010 the following notifications of interests in 3% or more of the company’s ordinary share capital in issue at the date of this
report had been received:
D G & M B Conn and associates
The wholly owned subsidiaries of Kingerlee Holdings Limited, total 25.36% :
Kingerlee Limited
Kingerlee Homes Limited
T H Kingerlee & Sons Limited
Number of shares
Non-
Beneficial beneficial
(19.30%)
997,509
(9.96%)
515,000
(7.70%)
397,673
(7.70%)
397,674
–
–
–
–
–
Strategy
The broad objectives of the group are unchanged. These are to enhance shareholder value via a combination of increasing asset value,
increasing profits and increasing dividends. The strategy by which the board of Highcroft seeks to achieve these objectives and our
comments in respect of 2009, including relevant key performance indicators follows. The directors are well aware that the current economic
circumstances are ones which increase the risks for all organisations but continue to believe that the strategy remains appropriate.
To continue the focus on the commercial property portfolio.
Allocation of total investments
Commercial property
Residential property
Equity investments
Total
2009
2008
2007
2006
2005
%
72
7
21
%
72
6
22
%
71
6
23
%
73
5
22
%
70
6
24
100
100
100
100
100
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08
Highcroft Investments PLC Report & Financial Statements 31 December 2009
Report of the directors continued
In January 2009 we bought the small property between our two properties in Oxford High Street. This purchase was made in the expectation
that it will allow us to create some marriage value and detailed investigations have started on plans to achieve this.
The flow of potential purchases in 2009 was lighter than we would have liked. Of those that we looked at prices were keener than we
thought would give value for shareholders. However, in 2010 opportunities have increased.
To continue to reduce the residential property portfolio when opportunities arise.
Number of residential disposals
Per annum
2009
2008
2007
2006
0
1
1
2
2005
2
We plan for two residential disposals per year, but as we sell only with vacant possession the annual rate is not within our control. Since the
year end one property has already been sold and we expect a second to become available for sale during 2010.
To have such a proportion of funds in equity investments which maintains a lower risk profile than would attach to a portfolio which
was 100% invested in property.
We intend that equity investments will represent 15-25% of total investments and the upper limit is a condition of our REIT status.
We generated £1,330,000, net, from the equity portfolio and used this to repay our medium term debt. The condition of the equity and
property markets in 2010 are such that we are not averse to making a further transfer of funds out of the equity investment portfolio and into
the property portfolio, consistent with maintaining a lower risk profile.
To seek property development opportunities from within our own property portfolio.
The purchase of a third property in Oxford High Street, referred to above, presents a new opportunity to create value from within our own
portfolio. The expected sale of the right to add residential units to the commercial property in Staines has still not come to fruition, though
we are continuing to explore the possibilities.
To seek, though not exclusively, new property acquisitions with development opportunities where the development risks can be
counter-balanced by income from the same investment.
This continues to be one of the potential attractions which we seek from new acquisitions, although no sufficiently appealing opportunities
presented themselves in 2009.
To use medium term gearing but to a level which would be perceived as cautious by comparison with other real estate businesses.
Medium term loans were repaid in 2009. We maintained contact with a number of banks, to which we are an attractive lending proposition
and we will use those contacts to expand the property portfolio in the future.
Business review
Results and dividends
The trading results for the year and the group’s financial position at the end of the year are shown in the financial statements and are
discussed further in the business review below.
The board is proposing a final property income distribution on the ordinary shares in respect of 2009 of 16.0p (2008 11.4p dividend) per share.
The total property income distributions for the year will be 26.0p per share as compared with total dividends in respect of 2008 of 18.4p.
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09
The dividends paid to shareholders during 2009 were as follows:
2008 Final: 11.4p per ordinary share (2007 9.25p)
2009 Interim: 10.0p per ordinary share (2008 7.0p)
2009
£’000
589
518
1,107
2008
£’000
478
362
840
Although we have an ambition continuously to increase distributions to shareholders, adherence to the REIT obligations may cause a less
even pattern than has historically been the case.
Financial performance – revenue activities
Gross income for the year ended 31 December 2009 was £2,235,000 (2008 £2,574,000).
Analysis of gross income
Commercial property income
Residential property income
Gross income from property
Income from equity investments
Total income
2009
£’000
1,877
66
1,943
292
2,235
2008
£’000
2,050
74
2,124
450
2,574
2007
£’000
2,062
64
2,126
406
2,532
2006
£’000
1,933
105
2,038
489
2,527
2005
£’000
1,833
84
1,917
339
2,256
Underlying commercial property income has fallen because the main Warrington property was a void for the whole of 2009 and
because 2008 benefited, to a greater extent than 2009, from rent reviews. Commercial property income in 2008 was also boosted by two
dilapidations claims totalling £92,000.
Residential property income reduced in 2009 relative to 2008 because of the sale of one property in 2008 and because of a second
property which became empty in the third quarter of 2009.
Property operating expenses remained high in 2009 because of the cost of bad debts, rates and insurance on vacant properties. However,
there was a lower level of dilapidations expenditure and rent review and other fees.
2009’s income from equity investments fell because of a general reduction in the level of dividends from a smaller portfolio, but also
because of the absence of special dividends and the reduced dividends from the banking sector.
Analysis of administrative and net finance expenses
Directors’ remuneration
Auditor’s remuneration including other services
Fees in respect of conversion to a REIT
Other expenses
Administrative expenses
Net finance expenses
Total expenses
2009
£’000
139
22
–
122
283
18
301
2008
£’000
166
34
47
77
324
61
385
2007
£’000
133
31
147
80
391
209
600
2006
£’000
141
32
–
74
247
188
435
2005
£’000
112
36
–
74
222
84
306
The ongoing running costs of the business remain well controlled. Three factors are relevant to an understanding of how 2009 compares to 2008:
2008’s expenses were reduced by a VAT reclaim for the three preceding years, giving a benefit of £38,000
The additional time and effort in both 2007 and 2008 required to achieve REIT conversion was reflected in the directors’ salaries for 2008
Lower interest rates and the repayment of medium term debt reduced net finance expenses.
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10
Highcroft Investments PLC Report & Financial Statements 31 December 2009
Report of the directors continued
Financial performance – capital activities
Overview of investment portfolios
● Retail Property
● Office Property
● Warehouse
● Leisure
● Residential
● Equities
36%
21%
12%
3%
7%
21%
Property investments at 31 December 2009
Commercial:
Multi-let office building in London, SW1
Radio station and office building in Oxford, let to the BBC
Distribution centre in Kidlington, Oxfordshire, let to Parcelforce
Multi-let retail units in Staines, with offices above
Office building in central Bristol, let to Royal & Sun Alliance
Distribution centre in Southampton, let to Metabo
Retail unit in Oxford, let to Jigsaw
Retail unit in Leamington Spa, let to Thorntons
Multi-let retail units in Cirencester, with residential above
Retail unit in Norwich, let to Austin Reed
Bank premises in Petersfield, let to Barclays
Retail unit in Oxford, let to Britannia Building Society
Licensed leisure and retail property in Warrington, let to Wetherspoons
Retail unit in Beckenham, let to Superdrug
Retail unit in Yeovil
Retail unit in Kingston, let to Kaleido
Bank premises in Reigate, let to Lloyds Banking Group
Nine residential properties
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Valuation
£’000
2,950
2,440
2,400
2,000
1,975
1,825
1,675
1,425
1,390
1,375
1,070
1,015
1,000
900
825
600
575
25,440
2,385
27,825
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11
Analysis of gains and losses on property
Realised gains on investment property
Realised losses on investment property
Revaluation gains on investment property
Revaluation losses on investment property
Analysis of gains and losses on equities – capital activities
Realised gains on equity investments
Realised losses on equity investments
Revaluation gains on equity investments
Revaluation losses on equity investments
Summary of investment activities
Purchase of property
Purchase of equity investments
2009
£’000
2008
£’000
2007
£’000
2006
£’000
2005
£’000
–
–
–
1,616
–
(5)
(5)
59
107
(6)
101
388
320
(33)
287
44
(36)
8
2,732
3,464
(416)
(8,985)
(3,819)
(398)
(65)
1,200
(8,926)
(3,431)
2,334
3,399
2009
£’000
263
(141)
122
2008
£’000
5
(446)
(441)
2007
£’000
272
(245)
27
2006
£’000
73
(159)
(86)
2005
£’000
77
(45)
32
1,416
90
1,320
1,382
1,671
(93)
(3,089)
(1,045)
(150)
(97)
1,323
(2,999)
275
1,232
1,574
2009
£’000
281
515
796
2008
£’000
–
750
750
2007
£’000
6
1,164
1,170
2006
£’000
7,437
1,029
8,466
2005
£’000
–
958
958
Summary of other key performance indicators
The directors have monitored the progress of the group strategy and the individual strategic elements by reference to certain financial and
non-financial key performance indicators.
Growth in gross income
Commercial property income
Residential property income
Total property income
Income from equity investments
Total income
Cost of voids and bad debts
Voids
Bad debts
2009
(8%)
(10%)
(9%)
(35%)
(13%)
2009
£’000
108
26
2008
(1%)
16%
(0%)
11%
2%
2008
£’000
136
42
2007
7%
(39%)
6%
(17%)
0%
2007
£’000
14
–
2006
5%
25%
6%
44%
12%
2006
£’000
10
–
2005
16%
4%
15%
19%
16%
2005
£’000
–
–
The retail property in Yeovil was vacant throughout 2009, apart from a short-term let before Christmas, and the lease on the leisure property
in Warrington void up until a lease was granted in mid-November.
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12
Highcroft Investments PLC Report & Financial Statements 31 December 2009
Report of the directors continued
Future developments for the business/future outlook
The economy in this election year now seems to be heading for a new period of uncertainty and turbulence which may well affect the
property market and stock market valuations. We have, therefore, used the recent stock market strength to realise funds thus emphasising
the portfolio’s defensive stance.
The latest wave of economic uncertainty may bring to the market the kind of assets, in size and quality, which are the mark of our property
operation.
Principal risks and uncertainties
Operational and financial risks facing the business are monitored through a process of regular assessment by the executive directors and by
reporting and discussion at meetings of the Audit Committee and the board.
The directors are of the opinion that a thorough risk management process is adopted which includes the formal review of all the six risks
identified below. Where possible, processes are in place to monitor and mitigate such risks.
1. Adverse economic environment
The economic uncertainties which remain globally and in the UK are a current concern for all businesses. We expect this to continue to
impact on consumer spending and on the financial health of businesses in which we are investors and businesses who are our tenants.
The independent valuation of all property assets includes assumptions regarding income expectations and yields that investors would
expect to achieve on those assets over time. Many external economic and market factors, such as interest rate expectations, bond yields,
the availability and cost of finance and the relative attraction of property against other asset classes, could lead to a reappraisal of the
assumptions used to arrive at current valuations. In adverse conditions, this reappraisal can lead to a reduction in property values and a
loss in net asset value.
2. Balance of income and assets
Highcroft’s status as a REIT is conditional upon a number of factors, the most critical of which is maintaining a correct balance of
income and assets such that the property side is always greater than 75%. Failure to maintain these balances can lead to exclusion from
the REIT regime. The directors are aware of this risk and it is a key principle underlying our investment decision-making.
3. Business strategy
The success of Highcroft is dependent upon establishing the right business strategy to fulfil shareholder expectations. We are explicit
about our strategy and assess our performance against that strategy in our annual report. In response to this risk, directors use planning
and forecasting of the business to help to ensure that outcomes are satisfactory for shareholders. As noted above, we continue to believe
that our strategy is the right one.
4.
Insolvency of a tenant
Rent collections are continuously reviewed by our property managers and regularly reviewed internally. Tenants’ financial status is
carefully reviewed when a new lease is entered into and when a property is acquired. The present economic environment has increased
the risk of tenant insolvency which leads to bad debts and voids.
The group has 24 commercial tenants, so that the risks associated with the default of individual tenants are quite well spread. Our five
largest tenants by current passing rent provide 46% of current income. The average credit score of these five tenants is presently 79. The
weighted average credit score of the whole portfolio is currently 75.
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5. Potential for unsatisfactory relationship with property advisers and managers
The performance of the property portfolio is key to our overall success and the professional advice we receive is critical. We work closely
with our advisers to review regularly the performance of the portfolio and also that of the advisers themselves. As with all our advisers,
the work is occasionally put out to tender.
6.
Internal controls become ineffective, irrelevant or incomplete
Potential issues affecting internal control are a continuous part of our thinking. Risks and their control are reviewed annually by the audit
committee and by the whole board.
Corporate environmental and social responsibility policies
In the conduct of the group’s business, the directors aim to act with honesty, integrity and openness and to conduct operations to the highest
standards. We seek to minimise the risk of our activities having any adverse effect on the environment.
Policy on the payment of suppliers
The group normally agrees payment terms with suppliers as part of the establishment of a contract. It is the group’s normal practice to pay
its suppliers before the end of the month following the month of supply. This policy applies at the present time and applied in 2009 when
average creditor days were 30 (2008 29).
Donations
Donations to charitable organisations amounted to £4,800 (2008 £4,500). There were no political donations.
Summary of profit before tax and income tax expense on revenue activities
Profit before tax
Income tax (expense)/credit
Distributable profit
2009
£’000
1,681
(11)
2008
£’000
1,889
33
1,670
1,922
2007
£’000
1,833
(271)
1,562
2006
£’000
1,956
(456)
1,500
2005
£’000
1,825
(459)
1,366
Financial instruments
Information on financial instruments is included in notes 18 and 19.
Auditor
Grant Thornton UK LLP have expressed willingness to continue in office. In accordance with section 489(4) of the Companies Act 2006 a
resolution to reappoint Grant Thornton UK LLP will be proposed at the annual general meeting to be held on 11 May 2010.
By Order of the board
D Bowman
Company Secretary
9 March 2010
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14
Highcroft Investments PLC Report & Financial Statements 31 December 2009
Directors’ remuneration report
The information contained in this report is not subject to audit except where specified.
Composition of the remuneration committee
The members of the committee are Richard Stansfield (chairman), Christopher Clark and John Hewitt. None of the committee has any
personal financial interest in the matters to be decided (other than as shareholders), potential conflicts of interest arising from cross-
directorships nor any day-to-day involvement in running the business.
Terms of reference
The approved terms of reference of the remuneration committee are as follows:
The remuneration committee is established in order to determine the company’s policy on executive directors’ remuneration and the
specific remuneration packages for each of the executive directors, including any pension rights and any compensation payments.
The remuneration committee consults the chief executive about their proposals relating to the remuneration of other executive directors,
but he is not present for the discussion of his own remuneration. The committee has access to advice from independent professionals at the
company’s expense.
Policy
Executive directors’ remuneration is reviewed annually having regard to the work done and the profits of the business but without a fixed
relationship between profits and any element of pay. Executive directors are given service contracts not longer than three years, within
which there is a notice period by either party of six months, and with no provision for compensation payments on termination. The contracts
of directors in office have expiry dates as follows, subject to shareholders re-election at annual general meetings when appropriate:
J Hewitt
C J Clark
R N Stansfield
J C Kingerlee
D Bowman
D H Kingerlee
Start date
1 July 2007
1 January 2009
1 January 2008
1 July 2008
1 July 2007
1 July 2009
Expiry date
30 June 2010
30 June 2012
30 June 2011
30 June 2011
30 June 2010
30 June 2012
The remuneration of the non-executive directors is determined by the whole board.
Directors’ interests
Directors’ interests are shown in the report of the directors on page 7. They are taken from the company’s register of directors’ interests
which is open to inspection, by appointment, at the registered office.
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Performance graph
The graph below shows Highcroft’s Total Shareholder Return (TSR) compared to the All Share index over the last five years. TSR over the
last five years is defined as share price growth plus reinvested dividends. The All Share index provides a basis for comparison as a relevant
equity index of which Highcroft is a constituent member.
TSR Performance Graph
160
150
140
130
120
110
100
90
80
70
60
2005
2006
2007
2008
2009
Source: Thomson Datastream
——— Highcroft Investments PLC - Total Return Index ——— FTSE Allshare - Total Return Index
Directors’ remuneration (audited)
John Hewitt
Christopher Clark
Richard Stansfield
Jonathan Kingerlee
David Bowman
David Kingerlee
2009
£
16,000
10,700
10,700
34,300
35,200
20,500
2008
£
18,000
12,200
12,200
37,300
43,800
27,500
127,400
151,000
There were no benefits in kind and no performance related payments were made. The group does not have a pension scheme for directors
nor an executive share option scheme or other long term incentive plan for directors.
R N Stansfield
Chairman of the Remuneration Committee
9 March 2010
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16
Highcroft Investments PLC Report & Financial Statements 31 December 2009
Consolidated statement of comprehensive income
for the year ended 31 December 2009
2009
2008
Revenue
Capital
Total
Revenue
Capital
Gross rental revenue
Property operating expenses
Net rental revenue
Realised gains on investment property
Realised losses on investment property
Net losses on investment property
Valuation gains on investment property
Valuation losses on investment property
Net valuation gains/(losses) on investment property
Dividend revenue
Gains on equity investments
Losses on equity investments
Net investment income/(expense)
Administration expenses
Net operating profit/(loss) before net finance expenses
Finance income
Finance expenses
Net finance expenses
Profit/(loss) before tax
Income tax (expense)/credit
Total profit/(loss) and comprehensive income for the year
Note
8
8
9
9
3
5
£’000
1,943
(253)
1,690
–
–
–
–
–
–
292
–
–
292
(283)
£’000
–
–
–
–
–
–
1,616
(416)
1,200
–
1,679
(234)
1,445
–
1,699
2,645
2
(20)
(18)
1,681
(11)
1,670
–
–
–
2,645
(377)
2,268
£’000
1,943
(253)
1,690
–
–
–
1,616
(416)
1,200
292
1,679
(234)
1,737
(283)
4,344
2
(20)
(18)
4,326
(388)
3,938
£’000
2,124
(300)
1,824
–
–
–
–
–
–
450
–
–
450
(324)
£’000
–
–
–
–
(5)
(5)
59
Total
£’000
2,124
(300)
1,824
–
(5)
(5)
59
(8,985)
(8,926)
(8,985)
(8,926)
–
95
(3,535)
(3,440)
–
450
95
(3,535)
(2,990)
(324)
1,950
(12,371)
(10,421)
27
(88)
(61)
–
–
–
27
(88)
(61)
1,889
(12,371)
(10,482)
33
1,180
1,213
1,922
(11,191)
(9,269)
Basic and diluted earnings/(loss) per share
7
32.3p
43.9p
76.2p
37.3p
(216.6p)
(179.3p)
The total column represents the income statement as defined in IAS 1.
The accompanying notes form an integral part of these financial statements.
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17
Consolidated statement of financial position
at 31 December 2009
Note
2009
£’000
2008
£’000
2007
£’000
8
9
10
11
12
13
14
27,825
26,344
7,397
7,282
35,222
33,626
35,545
10,830
46,375
103
946
223
963
326
813
1,049
1,186
1,139
36,271
34,812
47,514
–
90
777
867
–
969
969
1,836
14
440
826
18
426
743
1,280
1,187
1,240
688
1,928
3,208
1,909
2,705
4,614
5,801
34,435
31,604
41,713
1,292
5,696
2,656
95
1,292
4,080
2,137
95
18,229
17,773
6,467
6,227
34,435
31,604
1,292
7,094
4,203
95
17,527
11,502
41,713
Assets
Non-current assets
Investment property
Equity investments
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Interest-bearing loan
Current income tax
Trade and other payables
Total current liabilities
Non-current liabilities
Interest-bearing loan
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Revaluation reserve – property
– other
Capital redemption reserve
Realised capital reserve
Retained earnings
Total equity
These financial statements were approved by the board of directors on 9 March 2010.
J Hewitt
J C Kingerlee
Directors
Company number – 224271
The accompanying notes form an integral part of these financial statements.
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Consolidated statement of changes in equity
Revaluation reserves redemption
capital Retained
Capital
Realised
At 31 December 2009
1,292
2009
At 1 January 2009
Dividends
Transactions with owners
Profit for the year
Reserve transfers:
Non-distributable items recognised in
income statement:
Revaluation (losses)/gains
Tax on revaluation gains/(losses)
Realised gains
Surplus attributable to assets sold in the year
Excess of cost over revalued amount taken to
retained earnings
Total comprehensive income for the year
2008
At 1 January 2008
Dividends
Transactions with owners
Loss for the year
Reserve transfers:
Non-distributable items recognised in
income statement:
Revaluation (losses)/gains
Tax on revaluation (losses)/gains
Realised gains
Surplus attributable to assets sold in the year
Excess of cost over revalued amount taken to
retained earnings
Total comprehensive income for the year
Equity
Property
£’000
1,292
£’000
4,080
Other
£’000
2,137
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,200
–
–
–
416
1,616
5,696
1,230
(343)
–
(368)
–
519
2,656
Other
£’000
4,203
–
–
–
–
–
–
(8,926)
(2,539)
955
–
(272)
893
–
(420)
5,229
–
(3,014)
(2,066)
reserve
reserve
earnings
£’000
£’000
95
17,773
–
–
–
–
–
–
–
–
–
–
–
–
–
–
88
368
–
456
95
18,229
Capital
Realised
£’000
6,227
(1,107)
(1,107)
3,938
(2,430)
343
(88)
–
(416)
1,347
6,467
Total
£’000
31,604
(1,107)
(1,107)
3,938
–
–
–
–
–
3,938
34,435
(840)
(840)
(840)
(840)
(9,269)
(9,269)
–
–
–
–
–
(446)
692
–
–
–
–
–
–
–
–
–
11,465
(1,848)
446
–
–
–
–
–
–
(9,269)
–
246
(5,229)
(4,435)
Revaluation reserves redemption
capital
Retained
Equity
Property
£’000
1,292
£’000
7,094
reserve
reserve
earnings
£’000
£’000
£’000
Total
£’000
95
17,527
11,502
41,713
At 31 December 2008
1,292
4,080
2,137
95
17,773
6,227
31,604
Revaluation reserves include annual revaluation gains and losses, less attributable deferred taxation. The realised capital reserve includes
realised revaluation gains and losses, less attributable income tax. In accordance with the Articles of Association the revaluation and
realised capital reserves are not distributable.
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Consolidated statement of cash flows
for the year ended 31 December 2009
Operating activities
Profit/(loss) for the year
Adjustments for:
Net valuation (gains)/losses on investment property
Loss on disposal of investment property
(Gain)/loss on investments
Finance income
Finance expense
Income tax expense/(credit)
Operating cash flow before changes in working capital and provisions
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operations
Finance income
Finance expenses
Income taxes paid
Net cash flows from operating activities
Investing activities
Purchase of non-current assets – investment property
– equity investments
Sale of non-current assets
– investment property
– equity investments
Net cash flows from investing activities
Financing activities
Loan repayments
Dividends paid
Net cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January 2009
Cash and cash equivalents at 31 December 2009
2009
£’000
2008
£’000
3,938
(9,269)
(1,200)
8,926
–
5
(1,445)
3,440
(2)
20
388
1,699
120
(49)
(27)
88
(1,213)
1,950
103
83
1,770
2,136
2
(20)
(457)
1,295
(281)
(515)
–
1,845
1,049
(1,254)
(1,107)
(2,361)
(17)
963
946
27
(88)
(794)
1,281
–
(750)
271
857
378
(669)
(840)
(1,509)
150
813
963
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Notes to the financial statements
for the year ended 31 December 2009
1 Significant accounting policies
Highcroft Investments PLC is a company domiciled in the United Kingdom. The consolidated financial statements of the company for
the year ended 31 December 2009 comprise the company and its subsidiary, together referred to as the group. The accounting policies
remain unchanged, except in respect of IAS 1, IFRS 8 and the amendment to IFRS 7.
Basis of preparation
These financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting
Standards, as adopted by the European Union (“IFRS”) and those parts of the Companies Act 2006 applicable to companies reporting
under IFRS. These financial statements have been prepared under the historical cost convention, as modified by the revaluation of
investment properties and the measurement of equity investments at fair value. The adoption of IAS 1 (Revised 2007) does not affect
the financial position or profits of the group, but gives rise to additional disclosures. The measurement and recognition of the group’s
assets, liabilities, income and expenses is unchanged. IAS 1 (Revised 2007) affects the presentation of changes in equity and introduces
a statement of changes in equity, which was previously presented as a note to the financial statements. Under IFRS 8 the accounting
policy for identifying segments is required to be based on the internal management reporting information that is regularly reviewed by
the directors. As this basis has always been used by Highcroft, there is no change.
Accounting estimates and judgements
The preparation of financial statements requires management to make judgements, assumptions and estimates that affect the application
of accounting policies and amounts reported in the income statement and balance sheet. Such decisions are made at the time the
financial statements are prepared and adopted based on historical experience and other factors that are believed to be reasonable at
the time. Actual outcomes may be different from initial estimates and are reflected in the financial statements as soon as they become
apparent. The measurement of fair value and carrying investments at fair value through profit and loss constitutes the principal areas of
judgement exercised by the directors in the preparation of these financial statements. The fair valuations of investment properties and
equity investments at fair value are carried out by external advisors who the directors consider to be suitably qualified to carry out such
valuations.
New accounting standards and interpretations
The group’s approach to new accounting standards and interpretations issued during the year is set out below.
Standards amendments and interpretations effective in the year ended 31 December 2009 and adopted for the first time
IAS 1 (revised) Presentation of financial statements – comprehensive revision including a statement of comprehensive income,
disclosure of a third year statement of financial position and statement of changes in equity. This revised standard impacts the
presentational disclosure of the financial statements, but has no impact on the carrying values of items.
IFRS 8 Operating segments. This new standard does not change the format of the group’s financial reporting, as the format which we
have previously used already complies with the revised standard.
Amendment to IFRS 7 Financial instruments: Disclosures. This standard requires enhanced disclosures concerning fair value
measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of fair value
hierarchy.
Amendments to and interpretations of existing standards that are relevant to the group but are not yet effective and have not been
adopted early
The following amendments to and interpretations of existing standards have been published and are mandatory for the group’s future
accounting periods beginning on or after 1 January 2010 and which the group has not adopted early:
• IAS 27 (revised) Consolidated and separate financial statements – consequential amendment arising from amendments to IFRS 3.
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1 Significant accounting policies (continued)
Basis of consolidation
The group financial statements consolidate the financial statements of the company and its 100% subsidiary, Rodenhurst Estates
Limited, which are both made up to 31 December 2009, also following consistent accounting policies. Unrealised profits or losses on
intra-group transactions are eliminated in full.
Rental revenue
Rental revenue from investment property is recognised in the income statement on a straight line basis over the term of the lease.
Dividend revenue
Dividend revenue relating to exchange-traded equity investments is recognised in the income statement on the ex-dividend date. In
some cases, the group may receive dividends in the form of shares rather than cash. In such cases, the group recognises the dividend
income for the amount of cash dividend alternative with a corresponding increase in cost of investments.
Interest income
Interest income and expense is recognised in the income statement under the effective interest method as they accrue. Interest income
is recognised on a gross basis, including withholding tax, if any.
Expenses
All expenses are recognised in the income statement on an accrual basis.
Realised gains and losses
Realised gains and losses are calculated as the difference between the proceeds, less expenses, and the value of the asset at the
beginning of the financial year. The related revaluation gains or losses of previous years are transferred from revaluation reserve to
realised capital reserve.
Income tax
Income tax on the profit and loss for the periods presented comprises current and deferred tax, except where they relate to items
charged directly to equity in which case the related deferred tax is also charged or credited to equity. Income tax is recognised in the
income statement. As a REIT, tax is not payable on the income and gains generated in the tax exempt property business.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of equity
investments, using tax rates enacted or substantially enacted at the balance sheet date.
Investment property
Investment property is that which is held either to earn rental income or for capital appreciation or for both. Investment property is
stated at fair value. An external, independent valuation company, having an appropriate recognised professional qualification and
recent experience in the location and category of property being valued, values the portfolio every six months. The fair values are based
on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing
buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion.
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Notes to the financial statements (continued)
1 Significant accounting policies (continued)
In accordance with IAS 40, a property interest under an operating lease is classified and accounted for as an investment property on a
property-by-property basis when the group holds it to earn rentals or for capital appreciation or both. Any such property interest under
an operating lease classified as an investment property is carried at fair value.
Acquisitions and disposals are recognised on the date of completion. Any gain or loss arising from a change in fair value is recognised
in the income statement.
Equity investments
The directors have adopted the fair value through profit and loss option for its qualifying financial assets on the basis that to do so is in
accordance with its documented investment strategy. The equity investments are quoted and so are valued at market price.
Trade and other receivables
Trade and other receivables are recognised at fair value on initial recognition and subsequently at amortised cost. An impairment loss
is recognised for the amount by which the receivable’s carrying amount is believed to exceed its recoverable amount. To estimate the
recoverable amount, management considers the payment history of the tenant and takes into account the most recent credit rating of
the tenant.
Cash and cash equivalents
Cash comprises cash available at less than three months’ notice.
Trade and other payables
Trade and other payables are recognised at fair value on initial recognition and subsequently at amortised cost.
Interest-bearing borrowings
Interest-bearing borrowings are initially recognised at fair value less attributable costs. Thereafter the carrying amount is stated at
amortised cost obtained using the effective interest rate method.
Issued share capital
Ordinary shares are classified as equity because they do not contain an obligation to transfer cash or another financial asset. Dividends
are recognised as a liability in the period in which they are payable.
Segment reporting
The format used for segmental reporting is by operating segment, as the group operates in only one geographical segment. Segment
results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
A segment is a distinguishable component of the group that is engaged in generating income and expenses and which is subject to risks
and rewards that are distinct from those of other segments.
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2 Segment reporting
The operating segment reporting format identifies the operating segments, the performance of which is monitored by the group’s
management using a consistent internal reporting structure. Segment results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
The group is comprised of the following main operating segments:
commercial property comprising retail outlets, offices and warehouses
residential property comprising mainly single-let houses
financial assets comprising exchange-traded equity investments
2009
£’000
1,877
2,236
2008
£’000
2,050
(7,494)
26,485
25,478
656
2,322
66
375
74
373
2,386
2,048
3
66
292
1,327
7,400
1,177
2,235
3,938
450
(2,148)
7,286
820
2,574
(9,269)
36,271
34,812
1,836
3,208
2009
£’000
139
2008
£’000
166
19
–
–
3
–
122
283
9
10
13
2
47
77
324
Commercial property
Gross income
Profit/(loss) for the year
Assets
Liabilities
Residential property
Gross income
Profit for the year
Assets
Liabilities
Financial assets
Gross income
Profit/(loss) for the year
Assets
Liabilities
Total
Gross income
Profit/(loss) for the year
Assets
Liabilities
22% of gross commercial property income arises from two tenants each representing more than 10% of income.
3 Administrative expenses
Directors (note 4)
Auditor’s fees
Fees payable to the company’s auditor for the audit of the company’s annual accounts
Fees payable to the company’s auditor for other services:
The audit of the company’s subsidiary, pursuant to legislation
Tax services
Other services pursuant to legislation
Fees in respect of conversion to a REIT
Other expenses
In 2009 the auditor’s fees for the company’s subsidiary have been included with the auditor’s fee for the company.
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Notes to the financial statements (continued)
4 Directors
Remuneration in respect of directors was as follows:
Remuneration
Social security costs
2009
£’000
2008
£’000
127
12
139
151
15
166
The average number of employees, all of whom were directors, of the group during the year was 6 (2008 6). The three executive
directors are the key managers of the company. More detailed information concerning directors’ remuneration is shown in the directors’
remuneration report.
5 Income tax expense
Current tax:
On revenue profits
On capital profits
REIT conversion charge
Prior year underprovision
Deferred tax (note 13)
2009
£’000
2008
£’000
–
34
–
11
45
343
388
102
–
668
34
804
(2,017)
(1,213)
The tax assessed for the year differs from the standard rate of corporation tax in the UK of 28% (2008 28.5%). The differences are
explained as follows:
Profit/(loss) before tax
Profit/(loss) before tax multiplied by standard rate of corporation tax in the UK of 28% (2008 28.5%).
Effect of:
Tax exempt revenues
Profit not taxable as a result of REIT conversion
REIT conversion charge
Chargeable gains/losses (more)/less than accounting profit
Adjustments to tax charge in respect of prior periods
Income tax expense/(credit)
6 Dividends
In 2009, the following dividends have been paid by the company.
2008 Final: 11.4p per ordinary share (2007 9.25p)
2009 Interim: 10.0p per ordinary share (2008 7.0p)
2009
£’000
4,326
1,211
2008
£’000
(10,482)
(2,987)
(66)
(809)
–
41
11
(96)
(339)
668
1,507
34
388
(1,213)
2009
£’000
589
518
1,107
2008
£’000
478
362
840
On 9 March 2010, the directors declared a property income distribution of 16p per share (2008 11.4p) payable on 2 June 2010 to
shareholders registered at 7 May 2010.
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7 Earnings/(loss) per share
The calculation of earnings per share is based on the total profit for the year of £3,938,000 (2008 £9,269,000 loss) and on 5,167,240
shares (2008 5,167,240) which is the weighted average number of shares in issue during the year ended 31 December 2009 and
throughout the period since 1 January 2009. There are no dilutive instruments.
In order to draw attention to the impact of valuation gains and losses which are included in the income statement but not available for
distribution under the company’s articles of association, an adjusted earnings per share based on the profit available for distribution of
£1,670,000 (2008 £1,922,000) has been calculated.
Earnings:
Basic profit/(loss) for the year
Adjustments for:
Net valuation (gains)/losses on investment property
(Gains)/losses on investments
Income tax on gains and losses
Adjusted earnings
Per share amount:
Profit/(loss) per share
Adjustments for:
Net valuation (gains)/losses on investment property
(Gains)/losses on investments
Income tax on gains and losses
Adjusted earnings per share
8 Investment property
Valuation at 1 January 2009
Additions
Disposals
Revaluation gains/(losses )
Valuation at 31 December 2009
2009
£’000
2008
£’000
3,938
(9,269)
(1,200)
(1,445)
377
1,670
8,931
3,440
(1,180)
1,922
76.2p
(179.3p)
(23.2p)
172.8p
(28.0p)
7.3p
32.3p
66.6p
(22.8p)
37.3p
2009
£’000
2008
£’000
2007
£’000
26,344
35,545
41,487
281
–
–
(275)
1,200
(8,926)
6
(2,517)
(3,431)
27,825
26,344
35,545
In accordance with IAS 40, the carrying value of investment properties is the fair value of the property as determined by Jones Lang
LaSalle. The valuation has been conducted by them as external valuers and has been prepared as at 31 December 2009, in accordance
with the Appraisal & Valuation Standards of the Royal Institution of Chartered Surveyors, on the basis of market value. This value has been
incorporated into the financial statements.
The independent valuation of all property assets includes assumptions regarding income expectations and yields that investors would
expect to achieve on those assets over time. Many external economic and market factors, such as interest rate expectations, bond yields,
the availability and cost of finance and the relative attraction of property against other asset classes, could lead to a reappraisal of the
assumptions used to arrive at current valuations. In adverse conditions, this reappraisal can lead to a reduction in property values and a
loss in net asset value.
At 31 December 2009, investment property with a carrying amount of £4,950,000 is charged to Lloyds Banking PLC.
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Notes to the financial statements (continued)
8 Investment property (continued)
The group leases out its commercial investment property under operating leases. The future minimum lease payments receivable under
non-cancellable leases are as follows:
Less than one year
Between one and five years
More than five years
Total
Property operating expenses are analysed as follows:
Arising from generating rental income
Not arising from generating rental income
Total
9 Equity investments
Valuation at 1 January 2009
Additions
Disposals
Surplus/(deficit) on revaluation in excess of cost
Revaluation decrease below cost
Revaluation increase still less than cost
Valuation at 31 December 2009
The analysis of gains and losses on equity investments shown in the income statement is as follows:
Realised gains on equity investments
Revaluation gains on equity investments
Realised losses on equity investments
Revaluation losses on equity investments
10 Trade and other receivables
Trade receivables
Bad debt provision
Net trade receivables
Other receivables
2009
£’000
1,881
6,910
7,374
16,165
2009
£’000
123
130
253
2008
£’000
1,828
6,786
9,525
18,139
2008
£’000
183
117
300
2007
£’000
2,024
6,899
10,660
19,583
2007
£’000
86
13
99
2009
£’000
7,282
515
(1,723)
1,230
(18)
111
7,397
2008
£’000
10,830
750
(1,299)
(2,539)
(460)
–
7,282
2007
£’000
11,794
1,164
(2,403)
393
(118)
–
10,830
2009
£’000
263
1,416
1,679
2009
£’000
141
93
234
2009
£’000
137
(61)
76
27
103
2008
£’000
5
90
95
2008
£’000
446
3,089
3,535
2008
£’000
194
(41)
153
70
223
2007
£’000
272
1,320
1,592
2007
£’000
245
1,045
1,290
2007
£’000
45
–
45
281
326
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10 Trade and other receivables (continued)
Amounts due from tenants at each year end includes amounts invoiced on 25 December in respect of rents in advance for the period
25 December to 24 March. At 31 December 2009, amounts due from tenants which were more than 90 days overdue, which related
to rents for 2009 or earlier, totalled £70,000 (2008 £55,000). Provisions against these overdue amounts totalled £41,000 at the
beginning of the year, of which £6,000 was released and to which a further £26,000 was added to give a provision of £61,000 at
31 December 2009.
11 Trade and other payables
Deferred income
Social security and other taxes
Other payables
The directors consider that the carrying value of trade and other payables approximates their fair value.
12 Interest bearing loan
Medium term bank loan
The medium term bank loan comprises amounts falling due as follows:
Between one and two years
Between two and five years
Over five years
13 Deferred tax liabilities
2009
£’000
467
115
195
777
2008
£’000
466
104
256
826
2007
£’000
482
81
180
743
2009
£’000
–
–
–
–
–
2008
£’000
1,240
28
165
1,047
1,240
2007
£’000
1,909
37
220
1,652
1,909
Deferred taxation, arising from revaluation gains, provided for in the financial statements is set out below and is calculated using a tax
rate of 28% (2008 28%).
2009
At 1 January 2009
Realised in the year
Provided in the year
At 31 December 2009
2008
At 1 January 2008
Reversed in the year
At 31 December 2008
Investment
Equity
property investments
£’000
£’000
Total
£’000
–
–
–
–
688
(62)
343
969
688
(62)
343
969
Investment
Equity
property investments
£’000
1,124
(1,124)
–
£’000
1,581
(893)
688
Total
£’000
2,705
(2,017)
688
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Notes to the financial statements (continued)
14 Share capital
Authorised 8,000,000 ordinary shares of 25p each
Allotted, called up and fully paid 5,167,240 (2008 5,167,240) ordinary shares of 25p each
2009
2008
2007
£’000
2,000
1,292
£’000
2,000
1,292
£’000
2,000
1,292
The directors monitor capital on the basis of the carrying amount of equity and operate within the requirements of the articles of
association which permit borrowings up to 50% of total equity shown in the latest available audited financial statements.
Total equity
Medium term debt
Medium term debt as a percentage of total equity
2009
£’000
2008
£’000
2007
£’000
34,435
31,604
41,713
–
–
1,254
4.0%
1,927
4.6%
15 Capital commitments
There were no capital commitments at 31 December 2009. In December 2008, contracts were exchanged on the purchase of a
property in Oxford High Street. The contract value was £266,000 and completion took place in January 2009.
16 Contingent liabilities
There were no contingent liabilities at 31 December 2009 or 31 December 2008.
17 Related party transactions
Kingerlee Holdings Limited owns 25.36% (2008 25.36%) of the company’s shares and D H Kingerlee and J C Kingerlee are directors
and shareholders of both the company and Kingerlee Holdings Limited. The transactions between the company and Kingerlee Holdings
Limited or its subsidiaries, all of which were undertaken on an arm’s length basis, were as follows:
Property income distribution or dividend
Service charge in relation to services provided at Thomas House, Kidlington
Repairs to properties
Amounts outstanding at the end of the year
2009
£’000
280
14
–
Nil
2008
£’000
213
14
1
Nil
The company owns 100% of Rodenhurst Estates Limited. The transactions between the company and Rodenhurst Estates Limited, all of
which were undertaken on an arm’s length basis, were as follows:
Dividend received
Management charge receivable
Interest receivable on intercompany loan
Amounts outstanding at the end of the year
2009
£’000
1,000
116
50
2008
£’000
800
128
164
1,040
3,680
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18 Financial instruments and financial risk
Effective from 1 January 2009 the company adopted the amendment to IFRS 7 regarding financial instruments that are measured in the
balance sheet at fair value. This requires disclosure of fair value measurements according to the following hierarchy:
Level 1: quoted prices in active markets for identical assets or liabilities. The fair value of financial instruments traded in active
markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and
regularly available, and those prices represent actual and regularly occurring market transactions on an arm’s length basis
Level 2: the fair value of investment properties that are not traded in an active market is determined by using valuation techniques.
These valuation techniques maximise the use of observable market data. Our investment property portfolio is valued by
independent valuers in accordance with the RICS Valuation Standards on the basis of market value
Level 3: the fair value of financial instruments that are not traded in an active market, for example, investments in unquoted
companies, is determined by reference to the last known price at which shares were traded.
There have been no transfers between these classifications in the year (2008 none). The change in fair value for the current and previous
years is recognised through the consolidated statement of comprehensive income.
IFRS 7 measurement classification – 2009
Level 3
Level 1
Total
Unquoted
Quoted
Quoted
Level 2
equity
equity
and Investment
Total
investments investments
unquoted
property Investments
Opening cost
Opening unrealised (loss)/gain
Opening fair value at 1 January 2009
Additions at cost
Disposal proceeds
Net profit/(loss) realised on disposal
Change in fair value in the year on assets held at 31 December 2009
Closing fair value at 31 December 2009
Closing cost
Closing unrealised (loss)/gain
At 31 December 2009
£’000
4
5
9
–
–
–
–
9
4
5
9
£’000
4,212
3,061
7,273
515
£’000
4,216
3,066
7,282
515
(1,845)
(1,845)
122
1,323
7,388
3,371
4,017
7,388
122
1,323
7,397
3,375
4,022
7,397
£’000
27,963
(1,619)
26,344
281
–
–
1,200
27,825
28,244
(419)
27,825
£’000
32,179
1,447
33,626
796
(1,845)
122
2,523
35,222
31,619
3,603
35,222
IFRS 7 measurement classification – 2008
Level 3
Level 1
Total
Unquoted
Quoted
Quoted
Level 2
equity
equity
and
Investment
Total
investments investments
unquoted
property Investments
Opening cost
Opening unrealised (loss)/gain
Opening fair value at 1 January 2008
Additions at cost
Disposal proceeds
Net profit/(loss) realised on disposal
Change in fair value in the year on assets held at 31 December 2008
Closing fair value at 31 December 2008
Closing cost
Closing unrealised (loss)/gain
At 31 December 2008
£’000
4
5
9
–
–
–
–
9
4
5
9
£’000
4,340
6,481
£’000
4,344
6,486
10,821
10,830
750
(857)
(442)
750
(857)
(442)
£’000
27,966
7,579
35,545
–
£’000
32,310
14,065
46,375
750
(271)
(1,128)
(4)
(446)
(2,999)
(2,999)
(8,926)
(11,925)
7,273
4,212
3,061
7,273
7,282
4,216
3,066
7,282
26,344
27,963
(1,619)
26,344
33,626
32,179
1,447
33,626
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Notes to the financial statements (continued)
19 Financial instruments and financial risk
Categories of financial instruments
Financial assets at fair value through the income statement
Equity investments
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Financial liabilities measured at amortised cost
Trade and other payables
Interest bearing loan
2009
2008
Carrying
Income/
Carrying
Income/
amount
(expense)
amount
(expense)
£’000
£’000
£’000
£’000
7,397
1,323
7,282
(2,999)
103
946
1,049
777
–
777
–
–
–
–
–
–
223
963
1,186
826
1,254
2,080
–
–
–
–
–
–
Fair value and maturity of financial instruments
The group has no derivative financial instruments. Exposure to credit, liquidity and market risks arises in the normal course of the group’s
business. At 31 December 2009 the group had no borrowings and fair values were not materially different from book values.
Market risk
Market risk arises from the group’s activities as investors in properties and equities. The valuation of these investments is the principal area
of judgement exercised by the directors and in so doing they take the valuations of external advisers, carried out at the balance sheet date
but in the knowledge that market conditions change from time to time.
Credit risk
The group’s credit risk, i.e. the risk of financial loss due to a third party failing to discharge its obligation, primarily affects its trade
receivables. Creditworthiness of potential tenants is assessed before entering into contractual arrangements. The amount of trade
receivables presented in the balance sheet is calculated after any allowances for doubtful receivables, estimated by the directors. The
allowance as at 31 December 2009 was £61,000 (2008 £41,000).
The group has no significant concentration of credit risk, with exposure spread over a number of tenants. The credit status of tenants
is continuously monitored and particularly reviewed before properties are acquired, before properties are let and before new leases
are granted.
The group’s cash holdings are mainly in Lloyds Banking Group PLC and cash is also held by the group’s property managers and brokers
acting as agents, though not for long periods of time.
Liquidity risk
The group’s liquidity risk, i.e. the risk that it might encounter difficulty in meeting its obligations, applies to its trade payables and medium
term borrowings. The group has not encountered any difficulty in paying its trade payables in good time and has met all of the obligations
of its medium term borrowing.
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19 Financial instruments and financial risk (continued)
Interest rate risk
The group finances its operations through retained profits and medium term borrowings. Neither fixed rate instruments nor interest rate
swaps have been used. The group places any cash balances on deposit at rates which are fixed in the short term but for sufficiently short
periods that there is no need to hedge against the implied risk.
When medium term borrowings are used variable rates of interest apply. The weighted average interest rate paid in 2009 was 1.6%
(2008 5.6%). If base rate averaged 0.5% higher than it did in 2009, then the group’s net finance expenses would have been £6,000
higher. Similarly, had base rate averaged 0.5% lower than it did in 2009, then the group’s net finance expenses would have been £6,000
lower. Interest rate risk arises from the use of interest bearing financial instruments and is the risk that future cash flows from financial
instruments will fluctuate due to changes in interest rates. Interest rates are variable and the directors considered that the cost of fixed
rates is too great in relation to the risk that would be reduced by fixing. This policy was regularly reviewed.
Currency exchange risk
The group is not directly exposed to currency risk as it does not trade in foreign currencies. However, most of the group’s equity
investments are held in international companies and 22.5% (2008 17.1%) of the equity investment portfolio comprises overseas
holdings. The inherent currency risk affecting those holdings is an indistinguishable factor in determining their market value and is taken
into consideration as part of the overall assessment of investment risk.
Maturity of group financial liabilities
The analysis at 31 December 2009 of group financial liabilities, which are at variable rates, is as follows:
In less than one year or on demand:
Bank borrowings
In more than one year but less than two years:
Bank borrowings
In more than two years but less than five years:
Bank borrowings
In more than five years:
Bank borrowings
Total
Borrowing facilities
The group has no undrawn committed borrowing facilities.
20 Net assets per share
Net assets
Ordinary shares in issue
Basic net assets per share
2009
£’000
2008
£’000
–
–
–
–
–
14
28
165
1,047
1,254
2009
£’000
2008
£’000
34,435
31,604
5,167,240 5,167,240
666p
612p
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Five year summary
Investment properties – at annual valuation
Equity investments – at market value
Total net assets
Net asset value per share in issue at end of each year
Revenue (excluding gains/losses on disposals of assets)
Gross income from property
Dividend income
Profit available for distribution
Share capital
Average number in issue (000s)
Basic earnings/(loss) per ordinary share
Adjusted earnings per ordinary share
Dividends paid per ordinary share
All-Share Index
Highcroft year end share price
2009
£’000
2008
£’000
27,825
26,344
7,397
7,282
34,435
31,604
666p
612p
£’000
1,943
292
1,670
£’000
2,124
450
1,922
2007
£’000
35,545
10,830
41,713
807p
£’000
2,126
406
1,562
2006
£’000
41,487
11,794
42,875
830p
£’000
2,038
489
1,500
2005
£’000
33,461
10,620
39,164
758p
£’000
1,917
339
1,366
5,167
5,167
5,167
5,167
76.2p
32.3p
(179.3p)
37.3p
(8.5p)
30.2p
84.8p
29.0p
5,167
102.3p
26.4p
26.00p
18.40p
14.25p
13.70p
12.65p
2,761
445p
2,141
305p
3,287
717p
3,221
732p
2,847
615p
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Report of the Independent Auditor to the members of Highcroft Investments PLC
We have audited the financial statements of Highcroft Investments PLC for the year ended 31 December 2009 which comprise the
consolidated statement of comprehensive income, the consolidated financial position, the consolidated statement of changes in equity, the
consolidated statement of cash flows, the notes to the financial statements, the parent company balance sheet and the notes to the parent
company financial statements. The financial reporting framework that has been applied in the preparation of the group financial statements
is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting
framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the directors’ responsibilities statement set out on page 5, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/UKP.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2009
and of the group’s profit for the year then ended
the group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union
the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group
financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006
the information given in the report of the directors for the financial year for which the financial statements are prepared is consistent
with the financial statements; and
the information given in the corporate governance statement set out on pages 2 to 5 with respect to internal control and risk
management systems in relation to financial reporting processes and about share capital structures is consistent with the financial
statements.
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34
Highcroft Investments PLC Report & Financial Statements 31 December 2009
Report of the Independent Auditor (continued)
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
a corporate governance statement has not been prepared by the company.
Under the Listing Rules, we are required to review:
the directors’ statement, set out on page 5, in relation to going concern; and
the part of the corporate governance statement relating to the company’s compliance with the nine provisions of the June 2008
Combined Code specified for our review.
Tracey James
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford
9 March 2010
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35
Company balance sheet
at 31 December 2009
Fixed assets
Investments
Current assets
Debtors
Cash at bank
Creditors – amounts falling due within one year
Net current assets
Total assets less current liabilities
Capital and reserves
Called up share capital
Reserves
– Realised capital
– Capital redemption
– Revaluation
– Profit and loss account
Shareholders’ funds
2009
2008
Note
£’000
£’000
£’000
£’000
5
6
7
8
9
9
9
11
1,047
299
1,346
208
4,679
95
26,808
2,531
34,267
29,047
1,138
35,405
1,292
3,683
133
3,816
571
4,286
95
24,241
2,378
3,245
32,292
1,292
34,113
35,405
31,000
32,292
These financial statements were approved by the board of directors on 9 March 2010.
J Hewitt
J C Kingerlee
Directors
Company number – 224271
The accompanying notes form an integral part of these financial statements.
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36
Highcroft Investments PLC Report & Financial Statements 31 December 2009
Notes to the company’s financial statements
for the year ended 31 December 2009
1. Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with applicable UK GAAP accounting standards and under the historical
cost convention except for the revaluation of fixed assets. The principal accounting policies of the company have remained unchanged
from the previous year.
Income from fixed asset investments
Income from fixed asset investments includes dividends received in the year and interest receivable for the year.
Dividends payable
Dividend payments are dealt with when paid as a change of equity in the revenue reserve. Final dividends proposed are not recognised
as a liability.
Investments
Investments are included at the following valuations:
shares in subsidiary undertaking – at market value (net assets as shown by its financial statements are taken as a reasonable estimate
of market value)
equity investments (all listed on a recognised investment exchange) – at market value
unlisted investments – at market value estimated by the directors.
Gains and losses arising on revaluation are taken to the revaluation reserve.
Deferred taxation
Deferred tax is recognised on all timing differences where the transactions or events that give the company an obligation to pay more tax
in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it
is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences
reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Unprovided deferred taxation would crystallise on the sale of assets at their balance sheet value.
Gains on disposals of assets
Gains on disposals of assets are the excess of net proceeds over the valuation at the beginning of the year. They are not available for
distribution under the company’s articles of association and are taken to realised capital reserve.
2 Company profit for the year after tax
The company has not presented its own profit and loss account as permitted under section 408 of the Companies Act 2006. The profit
after tax for the year was £2,490,000 (2008 £2,387,000 loss). Information regarding directors’ remuneration appears on pages 14 and 15
of the consolidated financial statements.
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3 Auditor’s fees
Fees payable to the company’s auditor for the audit of the company’s annual accounts
Fees payable to the company’s auditor for other services:
The audit of the company’s subsidiary, pursuant to legislation
Tax services
Other services pursuant to legislation
In 2009 the auditor’s fees for the company’s subsidiary have been included with the auditor’s fee for the company.
4 Dividends
In 2009, the following dividends have been paid by the company.
2008 Final: 11.4p per ordinary share (2007 9.25p)
2009 Interim: 10.0p per ordinary share (2008 7.0p)
2009
£’000
19
–
–
3
22
2008
£’000
9
10
11
1
31
2009
£’000
589
518
1,107
2008
£’000
478
362
840
On 9 March 2010, the directors declared a property income distribution of 16p per share (2008 11.4p) payable on 2 June 2010 to
shareholders registered at 7 May 2010.
5 Equity investments
Valuation at 1 January 2009
Additions at cost
Disposals
Surplus on revaluation in excess of cost
Revaluation decrease below cost
Revaluation increase still less than cost
Valuation at 31 December 2009
Shares in
subsidiary
Total undertaking
£’000
29,047
3,915
(1,723)
2,935
(18)
111
£’000
21,765
3,400
–
1,705
–
–
Other investments
Listed
£’000
7,273
515
(1,723)
1,230
(18)
111
Unlisted
£’000
9
–
–
–
–
–
9
34,267
26,870
7,388
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Notes to the company’s financial statements (continued)
5 Equity investments (continued)
Equity investments are included at their market value. If investments had not been revalued they would have been included on the
historical cost basis at the following amounts:
Cost at 31 December 2009
Cost at 31 December 2008
Shares in
subsidiary
Total undertaking
£’000
7,129
4,570
£’000
3,754
354
Other investments
Listed
£’000
3,371
4,212
Unlisted
£’000
4
4
At 31 December 2009, the group held 100% of the allotted ordinary share capital and voting rights of Rodenhurst Estates Limited which
is a property owning company, registered in England and Wales and operating in England.
6 Debtors
Owed by subsidiary undertaking
Other debtors
7 Creditors – amounts falling due within one year
Corporation tax
Other taxes and social security
Other creditors
8 Share capital
Authorised 8,000,000 ordinary shares of 25p each
Allotted, called up and fully paid 5,167,240 (2008 5,167,240) ordinary shares of 25p each
2009
£’000
1,044
3
2008
£’000
3,680
3
1,047
3,683
2009
£’000
90
1
117
208
2008
£’000
423
13
135
571
2009
2008
£’000
2,000
1,292
£’000
2,000
1,292
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9 Reserves
At 1 January 2009
Profit retained
Dividends paid
Revaluation surplus – equities
Revaluation surplus – Rodenhurst Estates Limited
Realised gains
Tax on realised gains
Surplus attributable to assets sold in the year
At 31 December 2009
Realised
Retained
Revaluation
capital
earnings
£’000
24,241
£’000
4,286
–
–
1,230
1,705
–
–
(368)
–
–
–
–
88
(63)
368
£’000
2,378
2,490
(1,107)
(1,230)
–
–
–
–
26,808
4,679
2,531
The revaluation reserve includes annual revaluation gains and losses, less attributable taxation. The realised capital reserve includes
realised revaluation gains and losses, less attributable taxation. In accordance with the articles of association the revaluation and realised
capital reserves are not distributable.
10 Deferred taxation
Deferred taxation provided and unprovided for in the financial statements is set out below and is calculated using a tax rate of 28%
(2008 28.5%). Unprovided deferred taxation would crystallise if equity investments were sold at their balance sheet value.
Unrealised capital gains
11 Reconciliation of movements in shareholders’ funds
Profit/(loss) for the financial year
Dividends
Other recognised gains and losses:
Surplus/(deficit) on revaluation of assets
Realised gains/(losses)
Tax on prior years’ surplus now realised
Net increase/(decrease) in shareholders’ funds
Shareholders’ funds at 1 January 2009
Shareholders’ funds at 31 December 2009
Provided
Unprovided
2009
£’000
–
2008
£’000
–
2009
£’000
6,353
2008
£’000
4,651
2009
£’000
2,490
(1,107)
2008
£’000
(2,387)
(840)
1,383
(3,227)
1,705
(8,290)
88
(63)
(439)
–
3,113
(11,956)
32,292
35,405
44,248
32,292
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Highcroft Investments PLC Report & Financial Statements 31 December 2009
Notes to the company’s financial statements (continued)
12 Capital commitments
There were no capital commitments at 31 December 2009 or at 31 December 2008.
13 Contingent liabilities
There were no contingent liabilities at 31 December 2009 or at 31 December 2008.
14 Related party transactions
Kingerlee Holdings Limited owns 25.36% (2008 25.36%) of the company’s shares and D H Kingerlee and J C Kingerlee are directors
and shareholders of both the company and Kingerlee Holdings Limited. The transactions between the company and Kingerlee Holdings
Limited or its subsidiaries, all of which were undertaken on an arm’s length basis, were as follows:
Property income distribution or dividend
Service charge in relation to services provided at Thomas House, Kidlington
Amounts outstanding at the end of the year
2009
£’000
280
14
Nil
2008
£’000
213
14
Nil
Under the provision of FRS 8, transactions between Highcroft Investments PLC and Rodenhurst Estates Limited are exempt from these
disclosure requirements as Rodenhurst is a wholly-owned subsidiary.
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Directors and advisers
Company number
224271
Directors
John Hewitt, MA (non-executive chairman)
Christopher Clark, BA FCIS (non-executive)
Richard Stansfield, BSc FRICS (non-executive)
Jonathan Kingerlee (chief executive)
David Bowman, BA FCA (finance)
David Kingerlee (executive)
Company secretary
David Bowman, BA FCA
Independent auditor
Bankers
Corporate finance advisers
Property advisers
Independent valuers
Registrars
Solicitors
Registered office
Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
1 Westminster Way
Oxford OX2 0PZ
Lloyds Banking PLC
The Atrium
Davidson House
Forbury Square
Reading RG1 3EU
Charles Stanley Securities
131 Finsbury Pavement
London EC2A 1NT
King Sturge LLP
30 Warwick Street
London W1B 5NH
Jones Lang LaSalle
22 Hanover Square
London W1A 2BN
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield HD8 0LA
Clarks LLP
One Forbury Square
The Forbury
Reading RG1 3EB
Thomas House
Langford Locks
Kidlington
Oxon OX5 1HR
www.highcroftplc.com
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Back cover
Top left: Bank premises in Petersfield, let to Barclays
Top right: Retail unit in Oxford, let to Hotel Chocolat
Bottom left: Licensed leisure and retail property in Warrington
Bottom right: Retail unit in Beckenham, let to Superdrug
Highcroft Investments PLC
Thomas House
Langford Locks
Kidlington
Oxon
OX5 1HR
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